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Evergrande, once China’s top-selling developer, is reeling under more than $300 billion in liabilities, fuelling worries about the impact of its fate on the world’s second-largest economy and global markets.
The property developer, which averted a default last week by securing $83.5 million for the last-minute payment of interest on a bond, needed to make $47.5 million in coupon payments to bondholders by Friday.
Evergrande did not respond to Reuters request for comment. The people declined to be identified due to the sensitivity of the matter.
Evergrande missed coupon payments totalling nearly $280 million on its dollar bonds on Sept. 23, Sept. 29 and Oct. 11, beginning 30-day grace periods for each.
It still has nearly $338 million in other offshore coupon payments coming due in November and December.
The New York Times earlier reported https://www.nytimes.com/live/2021/10/28/business/news-business-stock-market that the developer made an interest payment, citing a person speaking on condition of anonymity.
DEBT CRISIS
Evergrande’s woes have snowballed for months and its dwindling resources set against its vast liabilities have wiped out 80% of its value, leading some analysts to consider default at some point inevitable.
Even as Evergrande secures funds to make payments, other Chinese developers whose fortunes have been hit by market concerns over Evergrande’s debt crisis have slid into formal default.
Fantasia Holdings Group Co Ltd, Sinic Holdings (Group) Co Ltd, China Properties Group Ltd and Modern Land (China) Co Ltd have all defaulted on dollar debt obligations this month.
Other developers with significant dollar debt have proposed extending offshore bond maturities or undertaking debt restructuring in a meeting with regulators, sources have said.
In a meeting with developers this week, China’s National Development and Reform Commission and the State Administration for Foreign Exchange told developers facing large offshore debt maturities to evaluate repayment risk and report difficulties.
Concerns over the systemic impact of a default by Evergrande have widened spreads on Chinese high-yield dollar debt to record levels as investors demand higher risk premiums.
Such concern has also kept the cost of insuring against default on China’s sovereign debt elevated. That cost earlier this month touched its highest level since the height of the pandemic in 2020.
BANK EXPOSURE
Founded in Guangzhou in 1996, Evergrande epitomised a freewheeling era of borrowing and building. But that business model has been scuttled by hundreds of new rules designed to curb developers’ debt frenzy and promote affordable housing.
Any prospect of Evergrande’s demise raises questions over the fate of more than 1,300 real estate projects it has ongoing in some 280 cities.
Bank exposure to developers is also extensive.
A leaked 2020 document, branded fake by Evergrande but taken seriously by analysts, showed the developer’s liabilities extended to more than 128 banks and over 121 non-banking institutions.
